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Greek left says ‘No’ to austerity

The outcome of a general election in Greece has reawakened concern among European Union policymakers that the country will not implement austerity measures.

Publicly, the EU’s leadership is keen to stress that the results of the election – in which less than a third of voters supported parties that signed up to the international bail-out – is legitimate democratic expression. Privately, however, there is real fear that Greece is now turning its back on economic reform and sliding out of the single currency.

In a sense, for the eurozone’s top officials and politicians, that prospect is not as horrific as it once was. Back in February and March, when eurozone governments were putting Greece’s government under ever- greater pressure to pledge to implement austerity conditions and to provide evidence that it had already brought in all previously agreed measures in return for approval of the bail-out, they did so having come to terms with the consequences of the alternative: a Greek default and subsequent exit from the eurozone.

Changed circumstances

The landscape has altered slightly since the summer and the autumn of last year, when the eurozone’s leaders feared a Greek exit as the worst possible outcome: commercial banks have agreed to take losses of more than half the value of their Greek bonds and private companies have reduced their exposure to Greek debt. The success of the European Central Bank’s policy of flooding the eurozone banking sector with cheap money since the start of the year – while beginning to wear off – has, nonetheless, helped calm the markets.

Yet the road ahead would still be rocky and urging Greece to continue its reform programme within the eurozone is still by far the preferred option among the eurozone elite.

The greatest problem facing Greece – and indeed the rest of the eurozone – is that the political uncertainty may be too great to pass the next round of austerity measures and structural reforms needed to obtain the next tranche of bail-out loans.

Fact File

Results

Parliamentary election (parties that passed the 3% threshold to gain a seat in parliament)

Every three months, the ‘troika’ of the European Commission, European Central Bank and the International Monetary Fund, checks that Greece is on track to meet its bail-out conditions and that it is making enough savings. The next challenge for the authorities in Greece – whoever is in charge – is to agree more than €11 billion in extra spending cuts for 2013-14 by June.

Without an effective government this will be impossible and the troika will not carry out an inspection until a new government is in place.

Greece’s finance ministry has already indicated that it could run out of money by the end of June if the country does not receive the next portion of its bail-out cash.

George Tzogopoulos, a research fellow at the Athens-based European and foreign policy think-tank Eliamep, said that most Greek voters were not anti-EU, despite voting for parties that are seeking to reverse EU policy. “Greek opinion is completely ill-informed about what is happening,” he said. “There is an important misconception [among Greek voters] about the strategy of Europe towards Greece.”

He said that previous governments had “demonised” the EU to cover their own failings. “It is in the Greek politicians’ interests to put all the blame on a foreign country like Germany and on other bodies like the troika,” he said.

In a speech on Tuesday (8 May) José Manuel Barroso, the president of the European Commission, denied that the vote in Greece signalled a rejection of the EU’s policies and said that commitments to reform the country’s economy needed to be fulfilled.